Drive Time
Five Myths on Leasing a Car
You can negotiate a smart car lease: here's how.
By Mark Solheim, Senior Editor, Kiplinger's Personal Finance
February 2008
Leasing often gets a bad rap, and no wonder: Its confusing argot sounds like fodder for a course in high finance, and dealers have been known to slip bad deals past confused car buyers who simply wanted low monthly payments.
About 20% of new-car transactions are leases, but I'm convinced that more people should be leasing. As interest rates rose, carmakers shifted incentives from rebates and low-interest financing to leases. If you know what you're looking for and negotiate smart -- and get over the five myths below -- leasing can be a good deal.
1. Buying is cheaper than leasing. If you keep a car well past the day the loan is paid off (or you paid cash to begin with), you save money by buying. But if you trade in your car before the loan is paid off, the value of the trade-in is unlikely to cover the remaining balance on the loan.
For example, if you leased a new Chevrolet Malibu LTZ for three years, your monthly payments would be $489. When you turned in the car at the end of the lease, you'd pay a "turn-in" fee of $395 and then walk away. If, however, you bought the Malibu with a five-year loan at 7.9%, your monthly payments would be $546, and after five years you'd own the car free and clear.
But say you want another car after three years. To match the residual value written into a three-year lease, you'd probably have to sell the Malibu on your own rather than trade it in. Then you'd have to pay off the loan. Buying would leave you about $1,600 poorer.
2. It's nearly impossible to negotiate a good buy. However, leases are negotiable. But first you need a tour of the jargon:
Capitalized cost.The vehicle price is called the capitalized cost. You should haggle over this just as hard as you would haggle over the price if you were buying.
Money factor. Another crucial term is the money factor. The lower this number, the better (multiply it by 2,400 to get an estimate of the interest rate). Dealers are sometimes reluctant to reveal the money factor, so be persistent.
Residual value. Finally, the residual value is the value of the car or truck at the end of the lease.
An inflated residual value lowers your monthly payments, but it can also hand-cuff you.
A more realistic residual value will make it easier to sell the lease, trade your vehicle mid lease or buy the vehicle at the end of the lease, says Tarry Shebesta, president of Automobile Consumer Services, a leasing service in Cincinnati.
Ask the dealer to show you deals from several banks, focusing on the money factor and the residual value. You can also go to LeaseCompare.com to comparison shop and apply for a lease. Or check out LeaseWise. For $335, the service will shop five dealers in your area.
3. Only businesses get a tax break. Tax laws allow businesses to deduct the monthly payments as an expense.
But individuals get a tax break, too. In most states, you pay sales tax only on the monthly payments, not the sale price of the vehicle. In the Malibu example above, you'd owe taxes on about $18,000 in payments rather than the $27,000 sale price. (Arkansas, Maryland, Minnesota, Texas and Virginia charge sales tax on the entire sale price.)
4. You may have to pay hefty fees when you turn in the car. The typical annual allotment of 10,000 to 12,000 miles is stingy, and the 18- to 21-cent-per-mile penalty for exceeding the limit seems daunting. But if you buy a car, you're also penalized for higher-than-average mileage when you trade it in.
You can probably negotiate a higher limit in exchange for a higher monthly payment and still save money.
5.If you want out early, you're stuck. Several fee-based Web sites, including LeaseTrader.com and Swapalease, match people who want to get out of a lease early with those who want to assume a short-term lease. At LeaseTrader.com you pay a fee of $80 to post your vehicle and $150 to complete the transfer of the lease.
Reader Comments (61)
Posted by: DaveRamsey.com at 01/08/2008 12:14:13 PM
...Why would you want to 'trade-in' you car. The Lease of a car is good only for the dealer...I would challenge (the writer of the column) not to assume that every three years one would 'need' a 'new' car...
Posted by: TexasScout at 01/09/2008 02:49:29 PM
You may not NEED to trade every three years, but you sure may WANT to trade. I get sick of a car after 3 years. My biggest beef, living in Texas, is the pitiful mileage allowance they give you. 12000 miles will be burnt off in the first 3 months by be.
Posted by: Tom at 01/09/2008 09:23:13 PM
...Comparing a 3 year lease with a purchase (using a 5 year loan) is apples and oranges. It would be accurate to consider the same time frame in both cases - either 3 or 5 years. Residual vs trade-in value. A 3 year old car with 36,000 miles in excellent condition has the same value regardless if it was leased or purchased & traded-in. There is no special category for leased car values. Or returns from rental car agencies. Or used car trade-ins...
Posted by: Debik at 01/14/2008 10:35:50 AM
We are on our second lease as you don't have to put a large down payment. One thing not mentioned is the wear and tear of the vehicle at the end of the lease. Car door dings, rock chips in the hood, condition of tires, condition of interior. I fought the charges for the hood chips, but in the end it cost us about $800. I too want a new car after 3 years, so it is worth us to lease.
Posted by: Mike at 01/17/2008 09:58:03 PM
Tom, if leases are based on MSRP, then why would anyone lease? If you can buy a car for $3K under MSRP, unless that is the price in the lease, I'm not signing. If you crash the car 5 minutes after you leave the lot, you are on the hook for the whole amount. Gap insurance? Why should I pay for a false value to the car. Also, Debik's point on wear and tear charges is exactly why I don't lease. I hear stories of dealers saying you owe us $2K for dings, but if you lease again from us we'll waive it.
Posted by: Ken at 01/18/2008 10:39:18 AM
If you replace the tires, make sure you replace the tire EXACTLY with what is on the car. We got sucked into a 4 yr lease and then got nailed at the end of the lease for putting on BETTER grade tires than what was on it in the beginning...
Posted by: Kirk at 01/18/2008 12:10:56 PM
Not to mention those of us that commute, who would go way, way over the 10-12k miles a year (think 20-25k miles a year), and after 5 years, the higher mileage difference doesn't have the same effect as 3 years. I do see your point of leasing if you want a new car every 3 years. If you own your own business, you should almost definitely lease. However, for a large number of us who keep our cars longer than 3 years, put on more miles, it doesn't make any sense to lease.
Posted by: TD at 01/18/2008 02:16:44 PM
Be sure you know your obligations under state and local laws. For example, where I live you not only pay sales tax on the entire price of the vehicle, if you want to buy it at the end of the lease, you pay sales tax again on the same vehicle, this time for the residual value. Also, check about personal property tax. Here, on a $25K vehicle that would add at least another $1000 for a 3 year lease. Debik's comment about normal dings and chips is also true ... they don't describe those the same way at lease signing as they do at turn in and don't even think about any after lease add-ons or modifications. Do it and be prepared to pay dearly.
Posted by: autopro at 01/18/2008 03:55:01 PM
Mike: Tom information of the structure of a lease is very accurate....Leases are based off the "sale" price....Obviously, there are good leases and bad leases, but leasing in general is good for many people. Let me ask you this:...If you financed a vehicle and after five years you try sell it or trade it in and your tires are below acceptable tread depth, and your driver's door has a door ding, and you have a tear in your seat. Do you think you can sell that to a customer or get fair marker value if your car is in sub-par condition? You can't expect the dealer or the prospective buyer to give you your asking price if they have to turn around and spend the money to repair...? Well, the same applies to a leased car.
Posted by: Nick at 01/18/2008 05:07:08 PM
I am a former car salesman. Before I was in the business I thought leasing was a rip-off. After working at the dealership and gaining a better understanding of the leasing process I became an advocate for leasing. I generally recommended leasing if you buy a a new vehicle every three years or so, drive less than 15,000 miles per year, and take care of your vehicles...Some 3/4 ton and 1 ton pick-ups don't lease very well but about everything else does. After trading my personal Super Duty every two years or so I ended up leasing an Infiniti G35X and am very happy. Also get nice sales tax break....I also suggest buying when interest rates are very low (0% to 3% for 3 to 5 years).
Posted by: trevor at 01/18/2008 06:02:31 PM
i have been in the car business 15 years and currently own a used car dealership. if you do normally trade your car in every 3 years as is the national average and you finance your purchase for five years as is the average you are crazy not to consider leasing. there are many benefits and few drawbacks. i have personally leased every new car i have ever owned and a few used ones as well. leasing eliminates any unknown factors in your ownership. a lease can be written for any mileage situation even someone driving 20-30-40 thousand miles a year. the leasing company makes a guess at the residual value and guarantees that to you. higher mielage leases will carry a higher payment but again if you buy and finance higher mileage driving will depreciate your vehicle faster and you will be more upside down when time to trade. the example given is accurate and the cost of ownership is pretty equal whether you lease or finance. wear and tear is scary for those who have not leased but here are the normal lease turn-in expectations...in most cases the lease and buyout typically cost you about 500-1000 more than if you had bought and financed 5 years from the get go. getting out of a lease early is exactly the same as trading a car you still owe financing on.
Posted by: The Bobster at 01/18/2008 07:26:09 PM
You don't get a tax break when you lease a car in Pa. You have to pay a 9% sales tax on a lease instead of the 6% rate on a buy, and you have to pay tax on both the depreciation and the interest on the loan....Oh, and Pa. only gives you a 11-month registration and inspection for the first year of the lease, so you end up having to get the car inspected with only a month left in the lease. This is a royal pain.
Posted by: ku frisco at 01/19/2008 12:36:44 AM
I oppose a lease from two points of view - I've owned my truck for 12 years (pd off for 8) and I'm a financial advisor. The article assumes that one will have a pmt at all times. Pay the thing off, take care of the vehicle, think about the money you can save..better yet, how much money have I saved by not having a payment for 8 years? Invest the money, retire earlier.
Posted by: Kees at 01/19/2008 07:17:43 AM
What happened to saving and paying cash for a used car? Of course all the car dealers and salesman that have responded like leasing. It is their bread and butter (you have to make a living, I understand).
Posted by: Martin at 01/19/2008 12:51:00 PM
If you're smart you can get a certified pre-owned for close to half the new sticker and have what ends up being a 4yr 50,000 mile warranty (assuming a 6yr 75,000 certified warranty on a 2yr old car that has 25,000 miles). This is way better than leasing or buying new as you don't see the value free fall of a brand new vehicle. Also, if you chose to sell in 3 years you typically have a fair amount of equity to apply to another 2yr old car. You are also selling a car with some warranty left which makes the buyer of your car more comfortable with the purchase. I personally have 2 high limit credit cards that I transfer my used car buys to and from as they offer balance transfer rates of 0 to .99% for a year. I got a 2yr old Lincoln Aviator with a monthly payment of 460 for 3 years. There are always ways to save money for those that are looking for them.
Posted by: Lisa at 01/19/2008 07:42:13 PM
I have leased, bought for cash & bought by payments & found that leasing has the added value of no major car repair costs. My experience has been that that mechanic quality/skill varies wildly & a very bad repair or just careless maintenance can lower the value of the car. It's much less hassle to service a new car for two years at the dealer, then turn in for a new one. The tax credits for even partial business use is worthwhile too.
Posted by: Steven Wrubel at 01/20/2008 12:47:34 AM
Leasing is never a good idea unless you can write it off as a business expense or you are so worried about repairs you just feel safer driving a newer car and are comfortable making payments for one the rest of your life.
Posted by: brian at 01/20/2008 09:10:07 AM
The average American trade cars every 42 months and drives 15,000 miles per year. The average loan term on a vehicle is now 62 months. It is not smart to buy a vehicle and put it on a long term contract if you are going to trade it in well before it is paid off. Therefore it makes economic sence to lease instead of buying in this case. If you are going to hold onto the vehicle for a long period of time than you should buy it...
Posted by: Jim at 01/21/2008 06:27:13 PM
My one lease experience was BAD. Even though in four years the minivan was repainted almost entirely, the leasing company tried to say there was excessive body repainting required. It was repainted (all sides) once after hail damage (after two years) and again to remove the only noticeable shopping cart ding by a dealer after his lock repair went very sour. They were also charging for some itsy bitsy windshield marks (sand grain size) which passed any inspection.
Posted by: WiseFool at 01/23/2008 04:18:31 AM
Leasing's a bad idea if you can't write it off. Most businesses can. Most people can't.
Posted by: fred at 01/23/2008 05:16:07 AM
after reading this five myths, i am even more convinced that leasing is not for many, including myself!
Posted by: Tom at 01/23/2008 07:01:59 AM
IF you need a new car every 3 years, then leasing is probably a decent option. My current car is 6 years old and still under an extended factory warranty for 2 more years. My last car was 6 years old when it was totaled. For as long as I keep my cars, buying is a much better proposition. It's nice having a car that's paid off yet still under a full factory warranty.
Posted by: Soulforged at 01/23/2008 07:27:27 AM
Leasing a car is in general terms not a good idea for most of the people, these five myths do not tell otherwise. Maybe, leasing is a good idea if you own a firm that can make some tax profits out of it, maybe if you are one of those guys who need the latest car in the market and hence jump from car to car in three or less years (lucky us, we can buy those almost new cars so old for you).... Currently I own a car bought new, but I've seen that there a lot of cars with 2 or even 1 year that real bargains, buying with 1 or 2 years gives you enough time to detect failures and make the brand repair them under the warranty. So, if you really want to make the most out of your money when buying a car then buy an used car with 1 or 2 years and 20.000 to 30.000 km.
Posted by: Jono at 01/23/2008 09:01:43 AM
I am currently on my 4th lease. I have only leased cars and have had nothing but good experiences. I should say that I am in Canada (although I am not sure that has any bearing). I have traded cars mid-lease, my last car I had for only 8 months of a 4 year lease before I traded out to a car (different manufacturer) that I HAD to have. I did so with NO downpayment, and my monthly payments went up by about $40. This being for a car that was more expensive then the one I had...
Posted by: Han Solo at 01/23/2008 09:08:31 AM
Its not leasing...it's called "fleeseing".
Posted by: JOhn at 01/23/2008 09:40:44 AM
who gets a 7.9% interest rate on a car loan these days????... your "lease" rate will probably be higher also.
Posted by: Kevin at 01/23/2008 09:42:34 AM
Leasing isn't for everybody - its true. But for a lot of people who like driving new cars every few years, it is cheaper than buying/trading-in every 3 years. Some people also like knowing that their car is always under warranty - their piece of mind is worth the extra expense....You can do simple math and break down the cost of ownership for a vehicle, with estimated repair costs included. Depending on incentives, you may get a better deal on a lease. It varies by vehicle and how much you drive. It isn't as simple as buying is better or leasing is better - it comes down to many factors....sometimes its better to lease, sometimes its better to buy.
Posted by: Barrett at 01/23/2008 09:42:45 AM
I leased an 2008 Acura TSX back in October and I must say it has been a great experience. Acura has some of the best lease terms out there, it saved me a bundle over buying a new car and at the end of the lease I can walk away without any fees. Not to mention the factory warranty covers anything that would happen during my lease period (3 years). I plan on rolling my lease over into a new Acura when my current lease is up.
Posted by: Kyle at 01/23/2008 09:53:34 AM
When a dealer tries to convince me to lease, it sounds a lot like arguments I make to my wife why I need a new gadget. I was hoping for some hard math why it would be worth my while, as like anyone I'd love a new car every few years..... But, being fiscally responsible and purchasing a car, and driving it for 6-8 years has saved me thousands. And I actually can back that up with math.
Posted by: ajax at 01/23/2008 10:11:51 AM
...Leasing is a convenient way for people to drive cars they can't afford to buy.
Posted by: MeMan at 01/23/2008 10:50:58 AM
Leasing a car and renting the house could not be more different. First of all your house WILL appriciate in value. Your car will lose value from day one and cost you money weather you own or lease. Leasing allows you to drive a newer car, that you will not have to spend money fixing as it ages and will end up costing you less due to lower payments and maintanance costs. Why would I want to own something that will be essentially worthless by the time its paid off?
Posted by: Eric at 01/23/2008 11:16:12 AM
I do not see how leasing a car is like leasing a house. Your home is an asset (of sorts) it appreciates in value,...for it's life-span your are still getting increased value back. A vehicle...depreciates the minute you drive it off the lot...Unless you are maintaining the vehicle like is needed (which a majority of the population doesn't) ownership just adds on extra cost.
Posted by: Wise at 01/23/2008 11:20:06 AM
Vehicles are a depreciating asset, and comparing home ownership to vehicle ownership is apples and oranges. With a lease, you pay for what you use (albeit at a profit to the leaser). Also, you are able to match your lease term agreement with the manufacturers warranty on the vehicle, giving yourself some protection against any warranty-based issues that arise. With ownership, you are stuck with maintenance costs well beyond the lifetime of the manufacturers warranty. The article is fairly accurate, but doesn't necessarily capture all the lease obligations or benefits. Simply put, if you want a new car every 3 years, leasing is for you. If not, then it's not.
Posted by: Marc at 01/23/2008 11:39:37 AM
You're making one huge assumption, by comparing a lease to a car payment. In certain circumstances a lease may be a better deal than a car payment (I've heard this a lot, but I've yet to see it in real life.) But a lease cannot touch the value of a cash-purchased car. My last three cars were cash purchased, and I will never finance again...
Posted by: Imad khan at 01/23/2008 11:40:44 AM
I think leasing is better for people with shorter commutes to work and groceries. For a guy like me I have to drive 40 miles to work (can't afford an apt. or house near my work because its too costly)a lease for 1 year 12-15K miles will run out in about 4 months. Buying a car, although is a hassle itself when you try to sell it back, but at least you are not limitted to how many miles you are allocated.
Posted by: Ryan at 01/23/2008 11:43:50 AM
Leases still aren't a great idea. Remember that dealers push them for one big reason. They make a big profit on them. That isn't a big enough reason to not get one, but it's enough that people should think twice...
Posted by: Jerry at 01/23/2008 11:52:25 AM
I can't DISAGREE more with the assertion that "leasing a car vs buying a car is same as leasing an house vs buying a house"...Buying a home is an actual investment. In MOST cases, the house is worth more (usually by a large margin) if you sell it 5+ years after your purchase it. And this number only increases the longer you hold onto the home. Purchasing a car is NEVER an investment (unless you're talking about people who collect rare autos - but that bears no relevance in the "buy v. lease" debate). When you purchase a car, its value will only decrease... My rule of thumb - if you like to switch cars every few years, then unless you can pay cash outright to purchase a vehicle, it might make more financial sense to go ahead and lease it. I think a lot of people who keep their cars no more than 3, 4, or 5 years would be surprised by the math if they sat down and calculated an actual buy v. lease scenario (including projected re-sale/trade-in values).
Posted by: owen at 01/23/2008 12:03:32 PM
good article... except: "An inflated residual value lowers your monthly payments, but it can also handcuff you."...not true. An inflated residual value allows you to pay less for the vehicle during the term of the lease. That's the whole point. -- there isn't a downside to that. If you want to buy the vehicle at the end of the lease, first -- don't lease it at all, and second, end the lease at term, and begin purchase negotiations. You don't have to buy it for the residual amount.
Posted by: Brian at 01/23/2008 01:01:15 PM
When you said "If you keep a car well past the day the loan is paid off [...] you save money by buying", 95% of readers can stop right there. For 95% of people, that is exactly what they should do. Yes, cars are depreciable, but a 'buy and hold' strategy involving high-quality cars gives the biggest boost to your future net worth. The other 5%? People whose jobs, family or health situation absolutely require a sparkling new car under all the manufacturer's warranties.
Posted by: Mark at 01/28/2008 06:22:22 PM
Leasing is definitely the way to go if you want to drive a new "second" car, but you should always own your primary vehicle, preferably a high quality slightly-used one that you keep for at least ten years. That way, you get to enjoy the leased car as a pleasure craft, at a much smaller payment and without the long-term committment. My philosophy is to buy and hold a quality vehicle for at least ten years (or until it dies). Once it is paid for, lease your second car for 3 years, then skip a year before leasing another, and so on, until you need to replace the primary vehicle. If you can wait a year before leasing again, you'll have the best of both worlds, saving money and enjoying your dream car througout your life.
Posted by: Katy at 01/29/2008 01:51:24 PM
All of these comments are very helpful. Thank you so much
Posted by: Candice at 02/05/2008 12:27:38 AM
...leasing is a good option for people who are looking for Mitsubishi and Kia-type cars made cheaply to sell cheaply.
Posted by: Eric at 02/05/2008 10:23:35 AM
After reading all your comments I can see as a group many are still against leasing a vehicle. All have recognized the fact that a new vehicle depreciates upon leaving the dealer lot. Now here's the deal... If you bought a new anything at any retail store then immediately tried to sell it, that item would have also depreciated based on it is no longer 'new'. Leasing is a great way to control your costs in a depreciating asset. Even high mileage drivers should look at the benefits of leasing as you know exactly the amount of your hard earned money is going into the car in your driveway. If you buy and drive a ton of miles your vehicle is worth less than any like model with lesser miles....
Posted by: Elaine at 02/05/2008 11:19:24 AM
Why do I lease? First, I live in the Northeast where road salt turns your car into a rust bucket. By the time you pay off a 5-6 year loan, your car is starting to look like a piece of swiss cheese. Second, fortunately I only have a 7-mile commute to work, so my mileage is pretty low...about 8-9,000 miles per year, so I'm lucky there. Third, as a single woman I like to drive a car covered by a warranty. By the time you pay off a conventional car loan your original warranty is up, and if you need major repairs you're at the mercy of a (rerpair) shop...(I've had friends who didn't have a car payment any longer, but suddenly had to shell out $1700 for a broken fragistat or whatever. What fun is that? I'd rather have a monthly payment and a nice newish car.) Fourth, I take good care of my car(s), and have always sold them at the end of my lease and have always ended up with at least $1000-2000 cash to use for a down payment on my next ride. For me, Viva-la-lease! ps, a caveat...find out about the tires when you lease (or buy) a new vehicle...my Mazda came with tires that only lasted 15,000 miles! I had to replace them at considerable cost...
Posted by: Jon at 02/07/2008 04:46:01 PM
After the last 2-3 years, I'm amused that people can still say that "house prices will appreciate", "you will sell the house for more than you paid" etc. Leasing is not the best financial move in most cases, but if it suits someones lifestyle -- go for it.
Posted by: Bobby G. at 02/13/2008 11:08:04 AM
I am a car salesman.. I will tell you that a lease is not good for everybody.. It totally depends on the customer, i have few customers trading their car after 10 years and a few trading every few years..so (for) customers who switch cars every 2-3 years, (a) lease is their best bet
Posted by: jes at 02/18/2008 12:14:01 AM
...Cars lose significant value over short periods of time. They are consumable items, not investments(there are few exceptions like a 67 Shelby)...I only drive my car to get from point a to point b. The fact I get there is what is important...I own three old, cheap cars. When the engine of my 1998 Contour with 187,000+ miles blew, it did not matter. I started driving the F150 and my wife still drives the Accord (both have over 200,000 miles). I then splurged and bought a 2000 Taurus for a couple thousand dollars with my emergency fund which will be replenished in four months. I do not worry about big repair bills because I can wait and shop around and pay for them in cash and usually negotiate a discount. Living patient, debt free life is definitely easier and a wiser solution....
Posted by: Lester at 03/05/2008 12:52:08 PM
Two things I like are (1) hot cars and (2) money in "the bank." Leasing gets me a hot car and I can invest the money I'd otherwise spend buying the car in something that might appreciate. Of course, the wisest choice is to buy a gently used car and drive it into the ground. But life's too short for that crap.
Posted by: John S. at 03/06/2008 02:09:51 PM
You say that leasing is a better financial option, IF you trade your car in every 3 years. You fail to mention that trading your car in every 3 years is a fiscally stupid thing to do in the first place. Truly intelligent people keep their cars more than 5 years. If you buy a quality reliable car, that holds it's value well, you will make far more on your investment during those years you do not have payments. Most cars built today can go more than 120,000 miles without major problems. ... Make your money work for you, keep that car for a longer amount of time.
Posted by: Steve Wayne at 03/07/2008 01:23:21 AM
Leasing is always a BAD idea for individuals. It is too risky. If you loose your job, or have other financiall problems the lease car will ruin you.
Posted by: ObiWan at 03/09/2008 02:14:20 PM
Would a car loan be any better if "you lose your job, or have other financial problems"? NO. If you meet the criteria stated in the story, leasing comes down to a matter of cash flow - you pay out less with a lease than you would with a loan or cash purchase of a vehicle. Just play by the rules of leasing. Been there; done that 6 times over the years.
Posted by: Kevin at 04/11/2008 08:52:25 AM
I'm about to bring in my leased vehicle for a mandatory 30k service call which is going to cost over $400!! I never paid that much in service for the vehicle that I own outright and has 110k miles on it. I take very good care of it. I'm shocked at how much they are charging for service and there's literally nothing I can do about it. They have me over a barrel. So, I won't be leasing again for this very reason.
Posted by: William at 04/21/2008 10:49:56 AM
A lease has a payoff JUST LIKE a loan, so if you loose your job, there is no difference. Regarding service, there is NO difference, ie - you HAVE to service your car, or it will be worth NOTHING when the motor/trans blows. Leasing is ONLY BAD (IF) you keep your car a long time PAST the time you would pay it off, which is typically five years, and I dont know about you, but I dont want to keep a high mileage auto that long BECAUSE it costs to fix it, whereas on the lease, it costs NOTHING to fix a broken vehicle because it is UNDER WARRANTY THE WHOLE TIME. As far as turn in fees and gap insurance, get a REAL lease (like through HONDA) and NEVER pay a turn in fee, have GAP INCLUDED AT NO CHARGE, AND get GREAT lease rates on the BEST VEHICLES. Have a lovely day everyone.
Posted by: al at 05/19/2008 08:51:18 AM
Individuals should not lease a car. Here is why: 1- as stated in this article, there is no way yo get a good price. They let you negotiate the price, but at the end they hit you with other variables. 2- they make you pay for mandatory service through your nose. For a 15k service I just paid over $500. Can you believe it? 3- when you return the car, fun continues, they inspect the car (get it detailed before you take the car to the dealer) and make you pay for minor scratches and dings....
Posted by: Matt at 06/06/2008 02:52:35 PM
If you lease a BMW there are ZERO maintenance fees for 4 years or 50k miles which ever comes first...
Posted by: Christine Byrnes at 10/21/2008 12:32:00 PM
If you are able to get a lease with 'no money' down be careful when you turn in your leased vehicle. The audit review process is stricter -- if you have more than 2 dings per panel on your car YOU WILL BE ASSESSED FOR EXCESSIVE WEAR AND TEAR, even if you turn the car in with well under the agreed upon mileage for the term of the lease. This is how the car companies and their credit holders make up the difference for the so called 'no money' down even if you are qualified under their "LOYALTY" program. My first lease was in 1996 and was a pleasant experience, so I did it again in 2000. Again the experience was ok but the 2004 lease with the same car company (VW) has left me questioning the experience. It has been a nightmare since I turned the car in and started a 2008 lease with them. After 15 years, so long VW at the end of this lease.
Posted by: Keli at 03/26/2009 09:23:31 AM
But if you are a notorious "car hopper", i.e. trade in cars like every 2 years, isn't it better to lease?
Posted by: Brian at 07/22/2009 10:24:38 AM
A young person, or a person with poor credit, should buy an inexpensive car - to reduce costs on insurance and property tax. Anyone getting a new car should lease - not buy. A. Would any reasonable person invest in (i.e. own) a depreciating asset? B. If the car is worth less than the residual, it is not your problem. For instance, if the car was repaired after a major accident and it shows on the Carfax, it will be difficult to sell or trade in if you own it. C. It is all about cash flow. If you can drive exactly the same car and invest more in a 401K or IRA, or even go on vacation - aren't you better off? D. Unless you are the only person on the planet who can accurately predict the future, a 3 year commitment with a lower monthly payment is better than a 5 year commitment with a higher monthly payment.
Posted by: Croz at 08/03/2009 04:31:32 PM
...Businesses get an INCOME tax deduction. This is huge. Individuals get a partial SALES tax refund which is minuscule in comparison. In your example an individual would save $630 (assuming 7% sales tax) and a corporation would save a minimum of $2700 depending on their business structure.
Posted by: jeff at 10/12/2009 05:01:11 PM
1. buying a car rather than leasing is only better if you plan on keeping the vehicle for a very long time. lets say most people finance a car for 6 years, well would it make sense to finance 1 single car for 6 years, maybe trade it for an additional 3-4 thousand bucks and have to keep it maintained, think 6 years, at least one set of tires, all regular maint. plus your big service times... In a lease, this is all taken into account and added into the lease payment, which, if there is a lease special, will be noticibly less than if you were to finance. So would you rather have 1 car for 6 years, or 2 brand new cars, new technology, new saftey and possibly new and better MPG cars in 6 years, pay no extra, and have zero chance of negative equity? 2. The vehicle price is called... the vehicle price..lol, you can negotiate that whether you lease or finance... doesnt matter, and an honest dealer will display all of the information and lay it out for you option by option. Skipping to 4, not sure about 3. The average mileage on a lease is between 12,000 and 15,000... but, you can make it whatever is conducive to your situation, if you want 25,000/year, it can be done, yes you will have to pay for it, but not as much as you would paying the fee of going over every mile on a shorter term mileage lease. 5. If you want out early of a lease, you arent stuck, as stated in the orginal text, you can trade your lease... but lets not forget people, same thing if you finance the car, you would be stuck with negative equity... either way you will pay for it. And also I think somewhere it was brought up about wanting to "own" your car... if you finance the car, the bank owns the car... not you... so unless you are writting a check, you dont "own" your car until there is no debt on it. leasing is not a bad as people want you to think it is... it was about 20 years ago, but now a days, its a great option. just my 2 cents.
Posted by: Yvette at 11/10/2009 11:30:59 AM
I leased a 2008 BMW 750li in Pa, I paid taxes on the entire cost of the car and now I am paying monthly taxes on my lease payment, Does this sound right to you?